Bitcoin Forum

Irrespective of rank I believe am still learning in gradual steps about bitcoin and therefore have this question to ask, it would be of good consequence for me if am well enlightened on this particular subject about bitcoin. So just in case,  someone I might want to talk to about bitcoin for the very first time happens to ask me I can comfortably address it too.

Question:
I have read few posts of persons talking about losing their wallet's containing BTC and couldn't recover it at all. Hence, as people keep losing their BTC due to loss of wallet seed phrase, can it affect or cause a decline in BTC supply entirely?

It can't affect cost of the entire supply, it will only reduce the circulating supply.
Those lost Bitcoin will no longer be in circulation but they will not be removed from the total supply.

21 million supply of bitcoin is fixed and the "lost" bitcoins will stay in their wallet and will not disappear and would not affect the total supply of bitcoin. the only thing it will affect is the total supply of Bitcoin that is and will be in circulation(as Nwada001 mentioned).

Coins lost due to losing private keys or seed phrase are out of circulation, but they are not provably removed from the circulation.
The only coins that are provably removed and will be never spendable are those that are haven't been claimed by the miners and those that have been burned using OP_RETURN.

Lost bitcoins add a slight value to the everyone’s coins because once a coin is stagnant for a long period of time in a particular wallet the market treats it as a those that have been removed from circulation and then the market price is calculated accordingly with the lower supply.

Here is what satoshi had to say about them

Bitcoin total maximum supply 21M
Circulating supply 19.34M
If a wallet containing bitcoins is permanently lost or a wallet's private key/seed phase is destroyed or lost then the maximum supply will not change or have any effect but the total circulating supply will be affected and the lost bitcoins will be reduced from the circulating supply.
If Bitcoin wallets are lost and disappear and cross the circulating supply, the total supply of Bitcoin at some point will be greatly affected and the price of Bitcoin in the market will be greatly affected.

Cannot give any effect if we talk about prices changes since the balance will just sleep with no transaction will happen. But if there's movement like dumping it especially if this is a huge balance then maybe a short time dump of the price will happen.

But it can lessen up the supply and we don't know yet what will be the real effect on it especially if many people will want more bitcoin and supply is to low. Maybe we can see price goes up then it will be expensive for other people to acquire some amount of it.

Bitcoin has a limited maximum supply and a constantly changing circulating supply, and any potential loss of someone's funds which involves the corresponding loss of private keys can be considered as a decrease in available supply, but the maximum supply of Bitcoin stays nearly the same. In order to decrease the total supply, coins need to be "burned" or destroyed in a provable way, which means it will be impossible to restore such coins even by finding private keys. There are many approaches to destroying coins in a provable way, but it is a rare occurrence that this happens naturally due to mistakes. Most often than not, people who want to burn their coins know what they are doing: they destroy their coins on purpose to achieve some goal that they see as more important thing than valuable coins.

When an individual is loosing bitcoin, it's technically a personal loss but not a loss to the blockchain. Technically the bitcoins are still available in the blockchain. So it can't be a change to the total supply. The total supply affects when someone burns coin from the chain. A lot of tokens have this functionality. But as of now, bitcoin is out of it.

So loosing bitcoin doesn't affect the total bitcoin supply. But yes, those bitcoins won't get circulated in the market. That's another way of looking at it.

The lost BTC will have an effect on the number of BTC in supply since it will reduce the amount in circulation when everyone finally gets to know about bitcoin and want to get some. There is 21 million in supply, but that amount will not be available to everyone when bitcoin finally gets accepted and adopted because of how many out of that supply has been lost due to loss of wallet seed. There will still be enough bitcoin to go round, but it will affect the number the available to everyone.

To burn your bitcoin, you can send them to OP_return outputs. Such outputs are not added to the UTXO set at all and are provably burned.
As I said in my previous post, miners can also burn coins with not claiming the block reward when they find a block.

The loss of Bitcoin from someone's wallet won't affect the total supply. The total supply of Bitcoin will remain 21 million, It is the limit set at the launch of Bitcoin and noting can change that supply.

The bitcoins that are lost were part of the circulating supply, the circulating supply will be reduced with those lost coins. Even if 2 million Bitcoins are lost from circulating supply the total supply won't be affected.

 

Bitcoin total supply is 20,999,999.9769 BTC and it will never change although we're unlikely see it since we will know it in 2140.

The circulation supply will be affected, it should be encourage Bitcoin price to increase because it will make Bitcoin more scarcer, but demand is playing major role to influence Bitcoin price.

It would definitely cause a decline or a reduction in the number of bitcoins in circulation. It doesn't reduce the number of bitcoin generally, just the amount in circulation.
Fortunately, this also wouldn't negatively affect the prices of the bitcoin in circulation. As the demand increases and combined with a limited supply, the price of bitcoin is bound to go only one direction. All the way up.

Lost bitcoins won't be recovered without access to lost private keys. It's impossible as from Private key to Public key then public address is one-way. You can not revert the process from Public address to Public key then Private key.

Total supply is 21M bitcoins.

Only circulating supply can be changed with new mined bitcoins and lost bitcoins. However, you won't be able to know how many bitcoins were lost.

Not at the moment, but reversing a public key to a private key could certainly be possible far enough in the future with quantum computers. If such an event occurred, then the several million coins in early P2PK outputs as well as any coins in outputs with a revealed public key (which includes all addresses which have previously spent bitcoin) could potentially have their private keys reverse engineered and therefore re-enter circulation, unless the community consensus is to fork to somehow lock all these coins.

Just because coins have not moved in a long time, or even if someone claims they have lost the private keys/seed phrase/wallet/whatever, it is wrong to assume those coins are permanently lost and can't be recovered.

We can prove that the number of provably lost bitcoin is 2,828.654 BTC, and this number can be safely removed from both the total and the circulating supplies. Anything which is not provably lost should not be considered removed from the supply.

It doesn't affect the total supply of Bitcoin because its supply is fix however the total amount of BTC that can be use to buy, sell, trade and also when you send BTC from your wallet 1 to your main wallet won't be the same since the BTC that people lost cannot be recovered unless it is now possible to brute force a the file of your wallet so that you can get the private key of the wallet. If you didn't get what I meant or confused with my explanation then let's put it this way, Total supply of BTC 21 million and the BTC that are accessible is 20 million which means the rest BTC in total of 2 million cannot be used by anyone at all. Anyway, it's just and example since I don't know the exact amount of BTC that are already lost.

There are 2 points to pay attention to when looking for an answer to your question:

1. If we start from the law of supply and demand, then the reduction of bitcoin in general circulation should cause an increase in the value of it. People have lost and will continue to lose access to their btc. At the moment, not 1 millionBTC have been lost and in fact, the total number of btc will be less than the claimed 21 mln.

2. On the other hand, technologies are developing and I admit the possibility that in the distant future (or not so) the power of computers (for example, quantum ones) will allow hacking (brute forcing) lost wallets. That will make it possible to get closer to the limit of 21 mln. bitcoins, as it was intended by the creator.

Probably, the events described in paragraph 1 will occur first, and then, in paragraph 2. But as I believe, with each new halving it will be more and more difficult to get btc, which means that it will be more reluctant to part with.

How do you understand the total supply? There are a lot of holders whose bitcoins are stored on their wallets and practically don't participate in the general turnover. You remember the recent story, when bitcoins moved from the old wallet only 10 years later. Many people can do the same. What I'm saying is that out of the 21 mln.BTC available now, some are lost forever (or not so forever) and some may just be on hold until the best price becomes available. As a result, it turns out that in the available offer there are not so many bitcoin that can be bought at the moment.

It's dope to see you're curious about Bitcoin, and I'm stoked to drop some knowledge on you. About your question, it's true that some peeps have lost their BTC wallets, and that can be hella frustrating. But losing wallets doesn't have any effect on the total supply of BTC. The supply of Bitcoin is predetermined and fixed, and losing wallets only reduces the circulating supply. Make sure to stash your seed phrase in a safe place and be cautious about security measures to dodge such losses.

 Bitcoin is a real game-changer of a technology, and you gotta know how to use it and keep it safe. By stashing your seed phrase in a secure spot and taking the right precautions, you can avoid any major losses. And remember, the price of Bitcoin can change in the blink of an eye, so make sure you're keeping an eye on the market and investing your money smartly.

Alright thanks for the clarification on the above question. @Nwada001.


In economics we are told following the law of demands and supply accordingly with the invisible hands of the market that when demands surpasses supply their will be increase in price. So if I may ask again, does this mean that the continuous loss of BTC in wallets which results to reduction in BTC circulation can lead to increments in the price of bitcoin or it doesn't work that way with bitcoin???

Yea, the law of Economics works also on Bitcoin. 
According to Satoshi, "All lost coins are considered a donation for the betterment of other holders." 
The higher the demand for a limited supply, the higher the price will be. 
If we happen to wake up one day and all 21 million are mined, then inside the entire 21 million, 5–10 million are lost in forgotten wallets. Other holders will rejoice because of the price increase the reduced circulation will cause. 

This question was asked in the early days, and fortunately satoshi himself answered it:



So, the lost coins are a donation that makes the rest of the coins more valuable, just as a single bitcoin can be divided into 100,000,000 SAT, and therefore there is enough satoshi for every human being in the universe.

You did justice to the question and I also agree with you that the only thing affected is the circulating supply of Bitcoin and not the total total supply because the coin irrespective of how much worth of coin was lost, is still very present on the blockchain an to the best of my knowledge, Bitcoins can't be burnt again hence it doesn't have any effect on the total supply.

Better still tell the newbie to always do their own research as that will be more informative and still gradually get him or her into the forum.

Yes, obviously there will be an effect, but I think the effect will be positive, and it will be beneficial for Bitcoiners.
Now let me tell you how it will be, the total supply of Bitcoin is only 21M and
The circulating supply is about 19M, Although all bitcoins in lost wallets are currently included in the circulating supply, there will be a time when they will be included in the total supply after 21m bitcoins are mined, and then from the total supply, these bitcoins will be like burning or decreasing supply and there will be a positive effect on the price.
To say this, I would say that those who have lost their wallet private keys are benefiting other bitcoiners by holding bitcoins for life.

@o_e_l_e_o I have read your comment with great interest as it is a question that I often ask myself and research it from time to time for new information.

When you say that the reversal of a public key to a private key could certainly be possible at some point in time in the future, wouldn't that be the end of Bitcoin entirely? You are now talking about specific outputs, but wouldn't that possibility for reversal apply to any known public key? How would Bitcoin survive such an event anyway?

I think I am probably not sufficiently understanding the mechanics and the consequences, but isn't a potential recovery of now so called permanently lost Bitcoin equal to Bitcoin's algorithm being cracked?

I would also like to ask you where you got the number 2,828.654 BTC from? You have given some answers here to some research that I am into from time to time and perhaps you can elaborate or provide a source.

Many thanks in advance!

If we ever reached a point where quantum computers posed a realistic threat to the elliptic curve cryptography that bitcoin uses, then we would fork to a different quantum resistant algorithm to allow bitcoin to continue to move forward. Ideally this would be several years before any real threat from quantum computing, allowing everyone plenty of time to move their coins to these new safe address types. There would be a question to be answered at that point about what would happen to all the so called "lost" coins which weren't moved in time, and whether they were somehow locked to prevent them from being stolen or whether we just let them re-enter circulation.

Certainly.

The theoretical current circulating supply is as follows:

(210,000 * 50) + (210,000 * 25) + (210,000 * 12.5) + ((784,963-629,999) * 6.25) = 19,343,525 BTC

Using the command gettxoutsetinfo on a node will tell you exactly how much bitcoin is within the set of spendable UTXOs. Anything which is unspendable (such as coins which have been sent to OP_RETURN outputs, or coins which miners failed to claim in the first place) will be excluded from this number. This command on my node currently gives the following: 19,343,305.70780786 BTC

Subtract those two numbers and you get 219.29219214 BTC which is not in the UTXO set and therefore is not spendable.

However, there are also some bitcoin which are in the UTXO set but are still provably unspendable. The main example of this is this transaction: https://blockchair.com/bitcoin/address/s-272edf45031dd498e7b3ae89e11ff21b. 2,609.36304319 BTC have been sent to an invalid script which cannot be unlocked, and so these coins cannot be spent.

Add those two numbers together and you arrive at the 2,828 BTC figure I gave above.

For easier tracking, you can use this site (https://bitcoin-supply.com/), which monitors all burned or otherwise provably unspendable bitcoin with a delay of just a few blocks.

visually no physically yes it makes the maximum supply lower but not like token burn it is in a more proper actual way

First of all thank you for the information!

Regarding the first part of your answer, that is a hypothetical situation where many questions come to my mind.

If what I have found so far is correct, the world would have to prepare for that day anyway when SHA-256 could be cracked as it is widely used in many (systemically critical) applications around the world. Essentially (and correct me if I am exaggerating here), the potential susceptibility of SHA-256 to an attack poses a massive systemic risk in many areas of our lives. Now I am not getting off-topic, but trying to get my point across. When we try to establish nuclear surveillance treaties in order to prevent the world from a nuclear disaster, how do we know that not some single country runs a gigantic laboratory researching and trying to build quantum computers that are able to crack vital algorithms in order to then attack or threaten to attack global critical infrastructure?

With more emphasis on Bitcoin, if there was a single actor succeeding in developing quantum computing that could reverse engineer the private key from a public key, what would be the incentive of that actor to go public in all honesty in order to protect the Bitcoin network instead of silently starting to move, for example, Satoshi's coins in the hope that Satoshi doesn't live anymore and can't prove that someone must have obtained a machine to successfully attack the network? What guarantees us that we get aware of the fact in a timely manner that a machine exists such that a fork to a quantum-resistant algorithm can be done (if it's not already too late)?

Would we first have to wait for the machine to exist in order to then fork to a proper new algorithm accordingly? Or could we fork to a different algorithm preventively, in anticipation of a certain computational power most likely being available some time soon? In other words, can a resistant algorithm only be developed once we know what magnitude of computing power we need to be resistant against? I know it is mathematics, but an algorithm is a moving target the same way computing development is a moving target I guess? The reasoning behind this two-fold question is whether we can predict an algorithm that will be sufficient once quantum computing becomes a thing. Or are there infinite degrees of quantum computing and we can only reactively fork instead of proactively?


This is also useful, thank you. Frankly speaking, I misread the number at first and thought it is 2 million instead of 2k, that is why I was quite surprised that you were aware of such a number. But yes, I am also of the opinion that only these coins you mentioned are actually lost. Many people think (or wish) that only because coins have been dormant for a decade, they should also be excluded from supply, further pumping artificial scarcity of the asset with the help of mental accounting...


That part got me thinking because isn't the re-introduction essentially equal to the end of Bitcoin? If a re-introduction occurs, any private key is at risk right in that moment. How would those two events occur simultaneously? 1) reverse-engineer and re-introduce lost coins while 2) fully keep and guarantee security and integrity of the entire network at all times?

And what is your stance on the re-introduction of lost coins? From an economic point of view, it seems to be negligible as the number of proven lost coins is so small. Since we have a highly divisible unit structure, I don't see the economic viability at risk ever for Bitcoin. Do you have some bullet points to share?

I hope you don't get badly struck by my wall of text ;) and thank you for taking the time!

So in general, hash functions are not particularly susceptible to being broken by quantum computers. Without getting too technical, the best known quantum attack against SHA256 would reduce the search space from 2²⁵⁶ to 2¹²⁸. 2¹²⁸ remains too large a number to attack (and indeed, all bitcoin private keys in the current system have 128 bits of security). Rather, it is the elliptic curve discrete logarithm problem (ECDLP) which is susceptible to quantum computing. In simple terms, this is the bit that turns your private key in to your public key. Again, without getting too technical, the best known quantum attack against the ECDLP could result in only 128³ operations being required to turn a public key back in to a private key.

So it would remain impossible to break any hash functions, meaning you could not turn an address back in to a public key, but it would be possible if you knew the public key to calculate the corresponding private key.

Again it's not hash functions, but otherwise you are correct. If the ECDLP can be broken, then so too can almost all encryption that is currently used across the internet, including in all financial institutions and governments.

There are no guarantees, and as you point out, an adversary with access to such a computer would be incentivized to try to steal as many coins as possible before being discovered. The safety net is that there are hundreds (if not thousands) of different research teams around the world all working on quantum computers, and it is highly unlikely that one team in secret is decades ahead of everyone else.

Not at all. There already exist quantum resistant algorithms we could fork to today if we wanted to. The problem with such algorithms at the moment is that they are generally quite large and inefficient, which would significantly increase transaction size and pose a variety of other problems. But with constant development ongoing, then hopefully by the time it becomes necessary we will have  much better algorithms available to choose from.

Not at all. As I said above, we are decades away from such a scenario and we will fork to a quantum resistant algorithm well before it becomes a serious concern. All that is at risk will be old lost or abandoned coins with revealed public keys, which will eventually over time be stolen and re-enter circulation. The majority of coins will be safe and the network itself will continue without issue.

So there are potentially several million coins in either P2PK outputs or reused addresses which could be stolen in such a scenario. We have absolutely no idea how many of those coins are actually lost and how many are not lost at all and the owner simply has chosen not to move them for many years, but would move them to a new quantum resistant address when the time comes. My opinion is that the network should not lock or otherwise freeze any coins, and if some lost coins are stolen and re-enter circulation, then so be it.

It will only affect the coins in circulation as supply is caped at 21 Million coins which will be mined by the year 2140 so it won't affect that part.There are many people who have lost access to their funds so they are out of circulation like previous reports around 4M coins have been lost so they will never be used but somehow if the owner recover them or remember the password they will again come back into circulation.But this is how the remaining one will have more value so it's said always take care of your funds.

This is my only problem with Bitcoin. Yeah, it's great that it's scarce, but there are a lot of Bitcoin that will never be used and I can't say that's a good thing. It's not ETH that can be burned and you just create more.

Any lost Bitcoin remains forever lost, no one is going to get that back, in this case it is actually helping Bitcoin supply because the max supply is reducing, comparable to the deflationary that exists in most crypto projects today.

Right now it hard to track all Bitcoin that are already lost, there is no way to do this because we can never know, there is a telegram channel that tracks Bitcoin addresses that haven't been used or active for the past 6 years and we can't say that the Bitcoin are lost just because the user isn't active, some whales don't care, they hold Bitcoin and leave it that way, for a very long time.

Man, losing that wallet seed phrase is a total bummer, right? But hey, don't go thinking it's game over for you! Actually, this little mishap might just be a blessing in disguise for the whole Bitcoin universe. Check it out, when the BTC supply takes a hit, it's like those Pokémon cards we all went nuts for back in the day—scarcer and worth even more! So, by misplacing wallets and shrinking that BTC supply pool, we're making Bitcoin even more desirable and sought-after.

No worries if your wallet goes AWOL. Just imagine you've built your very own VIP Bitcoin gallery—only the rarest, most valuable coins are allowed!

Keep soaking up that knowledge and having a blast, buddy. And remember, Bitcoin's like a box of choco-goodness. It's always a surprise, but totally sweet.

There are millions of wallets with small and huge amounts of Bitcoins which are considered dead because there is no activity on them. The possibility here is that these bitcoin are now burned. There is the limit of the Bitcoin Supply which is around 21Million Bitcoins and I want to assure you that this amount of bitcoin is not the final total supply. Because as I have already said that millions of Bitcoin wallet funded from stoshis to thousands of Bitcoins are also dead bitcoin wallets so it is hard to estimate the exact total supply. The estimated amount of the lost Bitcoin supply is from 15% to the 20% of the exiting supply as per some sources.

ChainAnalysis (https://blog.chainalysis.com/reports/lost-bitcoins) & Forbes (https://www.forbes.com/sites/ktorpey/2021/01/11/37-million-bitcoin-is-lost-or-inaccessible-heres-what-that-means/) The amount is close to the 3.7Million Bitcoins hmm this is the huge amount of Bitcoin but this is approximate the final results might be More then this or might be lower then this.

As Nwada001 mentions, it's important to distinguish total supply (which isn't affected) and circulating supply (which is). But the impact can be more general and go beyond the supply. Money is supposed to circulate, supposed to change hands. That's in its nature of being a medium of exchange. If people don't send it to one another, then it doesn't function as money, and then it has less value because it can't be easily exchanged for something else. So the more bitcoins are lost, the fewer bitcoins can actually be used, can change hands, and that's not good for Bitcoin's value. But the impact of this will become noticeable only if a really huge amount of people lose access to their coins IMO.

It's a forum, we're all here to learn more about bitcoin so don't worry about asking questions, even if they may look obvious  :)

If you lose your seed phrase your bitcoins are pretty much gone forever, it does affect the total supply because now there are less bitcoins in circulation, that means that now they are even more scarse because from the original 21 mln we know almost for sure that a few millions are lost, making the rest even more valuable. And let's not forget that if bitcoin keeps gaining value against fiat money than you'll need to use smaller and smaller fractions of bitcoin, maybe one day 0,1 bitcoin will be enough to purchase a car, who knows...

Yes, it directly affects total supply and also indirectly affects the price, as more and more coins are withdrawn from circulation. So, by forgetting your password or losing your passphrase you are sacrificing for others as the remaining coins are going to cost more eventually. At the moment, between 10 and 20% of bitcoins are considered to be lost forever. And then there's Satoshi's wallet which contains 1m coins which are stuck there forever I guess.  8)

There are only 21 million bitcoins in the world. It is finite. Its supply is limited. If people keep losing their BTC due to loss of wallet seed phrase there will definitely be a decline in supply unless in the case where they can be recovered. For example, a person who dies and didn't tell his family members that he has bitcoins or the recovery phrase. The bitcoins is lost forever and the amount in circulation declines. Although, in my estimation, the effect will be infinitesimal. So, there is nothing to be perturbed about.

There are 21 million bitcoins that will be ever generated and almost 19 million bitcoins are mined so far. Bitcoin is said to have a controlled inflation rate, i.e., its supply will increase at a certain rate and it will become constant after last bitcoin will be mined (expected in 2140). So if some bitcoins are lost forever then it means we are further decreasing down the bitcoins that are in circulation. The more coins we lose, more rear bitcoin will be.

Think of it as a donation to the entire economy of Bitcoin but it won't be affecting the supply and it's still the same. What I mean is a donation because it will help the demand higher and lessens the supply in circulation.
This will result in a higher price of Bitcoin if we've got a lesser supply that's in the economy because those are lost forever and can't be retrieved so that's likely serving as a contribution to the entire market to make the price go up.

The supply stands still because they are still there, and maybe one day someone will figure out a way to hack into all these dead and lost coins in the distant future when tech is higher, because that should be done but at the moment it does impact the price.

Well, since they can't be touched, they can't be sold neither, and since they can't be sold there are still buyers and coins are still bought and yet those coins are forever gone and can't be sold. That's why the price goes up a bit, or at least it benefits the price going up in the future whenever something like this happens. Plenty of people are worried that something else would happen but the reality is that the price is the only thing that changes.

Bitcoin is some next-level technology that's been turning heads since the jump. Listen, losing your Bitcoin wallet doesn't mean there'll be fewer BTC in circulation. The total supply of Bitcoins stays at 21 million, and as people lose their wallets, the amount of lost BTC goes up, but it doesn't change the total supply. Losing your wallet is a regular issue in the cryptocurrency world, but don't worry, there are ways to avoid it. Just keep your seed phrase on the down-low, and don't go telling anyone. Your seed phrase is the golden ticket to your wallet, and if someone gets their hands on it, they can quickly swipe your Bitcoins.

Let us say there are two kinds of supply created by Bitcoin, the Total supply (total coins that can be mined) and the total active circulating supply.  In Total supply, lost BTC almost has no effect because it is still part of the total supply while in active circulating supply the answer to this question is obvious.  Lost Bitcoin will affect the active circulating supply of Bitcoin.  Although idle Bitcoin is still part of the total supply of Bitcoin, the one that has an effect on the market is the active supply.

Obviously, in terms of market trade, less supply with the same amount of demand will result in a price uptrend and vice versa.  With lost BTC it helps make active BTC supply rarer and more scarce in the market.

It wouldnt be able to affect the overall supply which is 21M which it would really be that fixed no matter how many coins arent in circulation or totally lost in void. Usually prices or value do goes down whenever there's a huge sell on an exchange which we know that it would really be having that harmoniuous effect on every exchange that we do have in the market which would really be dictating out the value.
Therefore, we shouldnt really be having that kind of belief that if ever coins are lost because of lost keys or being hacked or scammed then overall supply
would really be just the same and its fixed.Just like the rest been saying that circulating supply would be affected though.